Building Your Professional Network

This article is based on the Research Roundtable program at IAMC’s Tampa Professional Forum moderated by Kevin Dollhopf, vice president of worldwide real estate, Hanesbrands Inc. and featuring Jim Bechard, professor, Conestoga College. The program was sponsored by BNSF Railway Co. and Wilson Economic Development Council.

Overview
Corporate real estate (CRE) is often seen as a supporting function that helps the business achieve its mission, but doesn’t necessarily contribute additional value to the enterprise. To demonstrate adding value, CRE professionals must show the measurable business impact that comes from a specific CRE action or intervention. These actions and their impacts must be aligned with the overall business strategy and focus on areas such as growing share value, increasing employee satisfaction and decreasing risks.

Demonstrating added value requires being an aggressive leader, understanding what matters most to C-suite leaders (like sales, margins, profits and share value), and showing how corporate real estate activities help those in the C-suite achieve their business objectives.

Key Takeaways
Corporate real estate has evolved tremendously in the past 40 years.
Corporate real estate, as a defined management function, got started in the early 1980s as companies realized they had a great deal of real estate and should take a more professional approach to managing it.

In the early 2000s the emphasis shifted to managing corporate real estate even better with fewer resources. The book Facilities Management and Corporate Real Estate Management as Value Drivers by Per Anker Jensen and Theo van der Voordt shows that the goal of CRE is now adding value. The book focuses on adding and measuring value, and includes specific key performance indicators (KPIs). It is a comprehensive review of the corporate real estate profession. It talks about what CRE professionals should be doing, should not be doing, and how to measure and communicate their value. 

The CRE is involved in a tremendous amount of work and activity. But CRE professionals need to understand what the CEO wants. CRE’s actions and interventions include project management, portfolio analysis, facility management, lease audits, performance reports, regulatory compliance and much more.

But in speaking with someone in the C-suite, it is unlikely they care about many of these activities. They care about the business and want to know about measures such as sales, profitability and future growth. Those in corporate real estate must be able speak to the C-suite in language that resonates.

To help them speak the language of CEOs, corporate real estate professionals should be reading the Harvard Business Review, because that’s what CEOs read. In the past 10 to 15 years, there has been just one HBR article about corporate real estate: “What Every Leader Should Know About Real Estate” from November 2009. This article had five key messages for C-suite leaders, which remain true today:

• Manage the portfolio. The key is not individual buildings, but the value of the entire portfolio.
• Build in flexibility. Because businesses change so quickly, business leaders are averse to long-term commitments. They want financial, organizational, and physical flexibility.
• Cultivate intelligence. Business leaders want accurate data about what is going on and want this data synthesized to know how it impacts the business. They want data interpreted in the context of corporate and competitive realities. 
• Team with professionals. Most companies are not in the real estate business. Business leaders want real estate professionals to work as a team with experts, consultants, and professionals that can help manage real estate most effectively.
• Embrace sustainability. Construction and the operation of buildings produce nearly 40 percent of all carbon emissions. Business leaders want to ensure that company real estate is being managed in a sustainable way.

This HBR article provides insights into how the C-suite is thinking about corporate real estate.

In the traditional value chain concept, facilities are not strategic. The traditional value chain has little mention of facilities and mentions “firm infrastructure” as tactical and operational, not strategic. A 2000 article by Szigeti and Davis described physical workplaces as more valuable to support the business than for their market or financial value; their primary purpose is functionality and what is most important is not the facility but what goes on inside of it.

The challenge for CRE is to show the value-adds. Professor Bechard used the analogy of a theater. The C-suite is the audience. There is the stage with the production that everyone sees and there are backstage services that support the production. The facility is the container. The C-suite is not looking at the details of what is going on backstage; they are looking at the production. The production is the operations of the business.

In the added-value model, there is an action or intervention, managed by CRE, which has an impact that adds measurable value.

The most common CRE interventions are to make changes in the physical environment, a change in facility services, and strategic advice and planning.

When organizations undertake CRE interventions, they are typically trying to make improvements and add value along 12 parameters.

12 CRE Added-Value Parameters

• User satisfaction
• Image
• Culture
• Health & safety
• Productivity
• Adaptability
• Innovation & creativity
• Risk
• Cost
• Value of assets
• Sustainability
• Corporate social responsibility

Selected key parameters are:

• User satisfaction. An employee’s satisfaction with their job consists of a mix of issues. When workers are satisfied with their job, the physical work environment is not a major consideration. But if workers are not satisfied, the work environment may play a role. There are many tools to measure employee satisfaction with the workplace.

  When someone in CRE is communicating with the C-suite, it is necessary to be explicit in explaining how CRE actions translate into higher employee satisfaction. For example, a sustainable workplace that helps attract employees is a way that CRE is affecting key organizational strategies.

• Adaptability. Businesses need to be able to make fast, economical changes to physical facilities, and organizations often have KPIs on their ability to easily redesign a layout, change a user’s location, expand or contract an area, or refinish a space. There are tools that measure an organization’s adaptability.
• Risk. Risk can include legal issues, occupational health and safety, environmental legislation, business continuity, and more. Risk is insufficiently evaluated by many organizations when making a change in physical facilities or services. It is important that CRE conducts risk analyses of projects to understand their risks and potential consequences. 

In the theater analogy, CRE provides back-stage services that support the organization’s primary business activities. For CRE to demonstrate value, it must measure the value that is created from its specific activities and communicate that to the C-suite.

Selected Discussion Highlights

• Focusing on business processes. The IT function has added value by not just adding new technologies but by redesigning business processes that improve the productivity of the business. CRE professionals have the opportunity to make a greater impact by thinking through how corporate real estate can play a role (or take the lead) in rethinking business processes.
• Understanding and driving key strategies. Kevin Dollhopf has a clear understanding of his company’s strategy, which is focused on selling more, spending less and generating cash. His job is to figure out how corporate real estate can help impact each of these strategies. One of his company’s strategies involves fostering strategic retail partnerships. He shared an example of how he helped achieve this strategy by securing office space next to the retailer Target’s headquarters. Even though this was more expensive than other options, Dollhopf convinced business leaders it was a worthwhile investment. This close proximity has helped build this relationship and drive business growth.
• Building reputational capital. Beyond just performing tasks and transactions, it is important to build reputational capital with the C-suite so when a problem needs to be solved, they know they can count on CRE to solve it. Kevin Dollhopf builds relationships by sitting in on weekly staff meetings with the CFO, the chief human resources officer, and the chief supply officer. This shows that corporate real estate is interested in what they are doing, is building trust and is engaged to help them achieve their key business strategies. 
• Using technology in CRE. Participants observed that the corporate real estate function needs to increase the use of technology in managing facilities. The emerging Internet of Things (IoT) platform has tremendous potential for connecting buildings and providing valuable data. CRE needs to seize this opportunity.